Former CEO Gerald H. Levine and Principal Financial Officer Marie A. Levine Found Liable On All Counts After 5 Day Trial

On October 16, 2003, following a five-day trial, a jury in the U.S. District Court for the District of Columbia found Gerald H. Levine and Marie A. Levine liable for financial fraud based on their overstating the assets of C.E.C. Industries Corporation (CEC). Gerald Levine, age 70, was CEC's chief executive officer; his wife Marie, age 56, was CEC's secretary-treasurer, the company's principal financial officer. The jury found that the Levines violated the antifraud provisions of the Securities Exchange Act of 1934 ("Exchange Act") and the Securities Act of 1933 ("Securities Act"): Exchange Act Section 10(b) and Rule 10b-5, and Securities Act Sections 17(a)(1), (2), and (3). The Levines were also found to have violated Exchange Act Section 13(b)(5) and Rule 13b2-1, which prohibit the falsification of a public company's books and records.

The Commission's complaint, filed on September 28, 1999, alleged that the Levines overstated CEC's assets in reports that they filed with the Commission for CEC's fiscal years 1996 and 1997. The complaint also alleged that the Levines, acting through another corporate entity, Wire to Wire Inc., profited from their fraud by selling CEC stock while they knew that they had overstated CEC's assets. In particular, the complaint alleged that the Levines overstated the value of two purported corporate assets (1) a 9,000-acre tract of land in Tennessee that they claimed held 52 million tons of coal and substantial timber assets; and (2) forty-one paintings by "Sky Jones," which they claimed had a value of $1.7 million. The Commission proved at trial that CEC (and its corporate affiliates) did not even own the land and that the paintings were worth no more than $10,350.

The Court has not yet determined the sanctions against the Levines. The Commission's complaint seeks bars permanently prohibiting them from serving as officers or directors of any publicly traded company, a permanent injunction against future violations of the securities laws, disgorgement of illicit profits from sales of CEC stock, and civil penalties. Previously, on September 11, 2001, CEC settled the Commission's financial fraud charges against the company, without admitting or denying the allegations, by consenting to the entry of a final judgment that included a permanent injunction.

The Commission acknowledges the valuable assistance provided by several CEC shareholders, who brought to the Commission's attention many salient facts related to this matter. For further background information, please see Litigation Release No. 17139 (September 19, 2001) and Litigation Release No. 16299 (September 28, 1999).